(Adds comment from oil industry group, paragraphs 8-9)
By Michael Erman
NEW YORK, June 18 President George W. Bush's
proposal to end a long-standing ban on oil drilling off the
U.S. coasts could be a boon for oil companies and the service
companies that help them drill for oil and natural gas.
Bush urged Congress to end the ban on Wednesday, arguing
that policies that keep oil companies from developing possibly
productive regions have played a role in driving oil prices
above $130 a barrel.
Drilling is currently allowed only in the western and
central Gulf of Mexico -- offshore Texas, Louisiana,
Mississippi and Alabama -- and offshore Alaska.
The oil companies who already have offshore projects in the
United States, like Chevron Corp (CVX.N), ConocoPhillips
(COP.N), BP (BP.L), Exxon Mobil Corp (XOM.N) and Murphy Oil
Corp (MUR.N), would be the first beneficiaries of an end to the
moratorium, analysts said.
Still, the real impact of any new policy is unknown and
depends on how it would be implemented and, more importantly,
what's in the ground. Plus, it could take a decade or more to
find the oil and produce it.
"It's a huge opportunity because there's a tremendous
amount of acreage involved. But the magnitude of the
opportunity -- the magnitude of what's there -- is strictly
conjecture," said Howard Weil analyst Gene Gillespie.
Top oil company executives have long called for an end to
the moratorium, saying the lack of access to key oil and gas
reserves is one of the toughest challenges facing the
With U.S. oil companies facing dwindling options abroad as
countries like Venezuela and Russia tighten down on access, the
U.S. offshore could give them a way to replace their crude oil
reserves, said Sara Banaszak, a senior policy analyst at the
American Petroleum Institute.
Wall Street has criticized U.S. oil companies in recent
years for failing to replace oil reserves they produce, so
"every investment opportunity for them to increase their
reserves is critical," Banaszak said.
The U.S. Congress banned most offshore drilling in 1981.
Bush's father, former president George H.W. Bush, followed suit
with an executive order banning drilling in the wake of the
1989 Exxon Valdez oil spill in Alaska -- the worst tanker spill
in U.S. history.
But energy policy has become a key issue ahead of the
November presidential elections as average U.S. gasoline prices
passed the $4-a-gallon level for the first time this month.
The most obvious companies that stand to benefit from
opening new areas off the coastlines would be the offshore
drillers, said Calyon Securities oilfield services analyst Mark
Urness said it should favor drillers with higher
specification jackup rigs like ENSCO International Inc (ESV.N)
and Rowan Companies Inc (RDC.N) that work in waters not visible
from the shore.
He said all companies with rigs that can drill in deep
waters should also benefit. The largest U.S. deepwater drillers
are Transocean Inc (RIG.N), Noble Corp (NE.N) and Diamond
Offshore Drilling Inc (DO.N).
(Additional reporting by Anna Driver in Houston and Chris
Baltimore in Washington; Editing by Gary Hill)